Black Friday doorbusters and other holiday promotions helped America’s top retailers beat Wall Street’s expectations for November. Retailers reported today an overall 6% increase in sales over November 2009.
Retail analysts’ average estimates had forecast a boost of 3% to 4%, according to Thomas Reuters, which had projected a 3.6% increase.
The results affirm what many retailers had been reporting: increased traffic both before, during and after Black Friday as well as an increase in some discretionary spending.
The Thomson Reuters same-store sales index, based on 27 retailers reporting, showed an increase of 6% for November, compared with Wall Street’s estimate of 3.6%. Comparable store sales or sales at stores open at least a year, are a closely watched gauge of retail performance and offer an early look at the strength of the shopping season, which can account for as much as a third of retailers’ annual revenues.
Since consumer spending equals about 70% of the U.S. economy, this year’s holiday sales season is being scrutinized to determine if the economic recovery can pick up steam.
Aggressive Retailers Got Rewarded
The November increase was the biggest since 2007 except for a 9.2% rise in March.
While many diverse retailers reported bigger than expected gains, promotional activity and discounting helped lure in shoppers. Some analysts cautioned that the discounting will need to continue in order to bring shoppers out in December, which could pressure margins.
“Retailers came out aggressively and got rewarded,” said Sherif Mityas, a partner in the retail practice at A.T. Kearney. “Merchants laid out a wider breadth of deals across the holiday weekend rather than the usual concentration on a handful of door-busters, and shoppers responded.”
John Long, a retail strategist at firm Kurt Salmon Associates said, “It’s difficult to say whether the promotions we saw in November, particularly early on in the month, pulled forward some of the volume we would be expecting to see in December.”
Long said December same-store sales would need to rise more than November’s number to end up with a similar increase. In December 2009, sales were up 3%, compared to November 2009, when they were up just 0.4%.
Black Friday weekend sales were particularly strong for apparel and for online sales, according to research from MasterCard Advisors’ SpendingPulse, which estimates total retail sales across all payment forms.
Pent Up Demand Fuels Fashion Sales
“Household wallets are pointing a little bit more toward retail,” said Michael McNamara, MasterCard’s vice president, research and analysis, who added he was encouraged by a 9.6% gain in apparel sales, which was fueled by a 3.9% increase in sales of women’s clothing and a 7.2% gain for men’s apparel. This was the second month in a row that women’s apparel sales recorded a gain, and the increase in men’s apparel reversed a sales decline in October.
Women’s apparel and accessories may be benefitting from pent-up demand, McNamara said. Since many women had cut back on spending on themselves during the recession, so a pick up in spending is an encouraging sign.
“We have continued to see people who have a pent-up demand,” said Keith Jelinek, a retail director at AlixPartners. “People are more optimistic because they feel things can’t get worse and believe there is a light at the end of the tunnel.”
A.T. Kearny’s Mityas said, however, that consumer spending is still heavily driven by promotional discounts, and that many shoppers are holding off for further price reductions.
“No question, consumers are still playing let’s-make-a-deal,” says Mityas. “They’ll wait until retailers blink again.”
Among the retailers reporting November sales today are: